What is Bookkeeping and Why Do You Need It?

In this episode of Follow the Bookkeeper, Morgaine Trine dives into the world of bookkeeping and explains what it is, why businesses need it, and clears up some common misconceptions.



What is Bookkeeping?

Bookkeeping has evolved significantly from its paper-based origins. Today, bookkeeping involves:

  • Recording and tracking financial transactions.

  • Summarizing this activity into reports to understand the financial health of the business.



Compliance vs. Management Bookkeeping



At Honestly Bookkeeping, we have two methodologies of thinking about bookkeeping. They are:

  • Compliance Bookkeeping: Ensures your business meets tax filing requirements. This is essential to avoid penalties from the IRS.

  • Management Bookkeeping: Provides reports and insights to help business owners make informed decisions. This is crucial for businesses looking to grow or make strategic changes.



Beyond the Basics

Modern bookkeeping software allows bookkeepers to go beyond simple data entry. They can also handle tasks like:

  • Invoicing

  • Bill payment

  • Tax return preparation

  • Monitoring key performance indicators (KPIs)

  • Offering strategic financial advice



Bookkeeping Myths Debunked

Morgaine dispels two common myths about bookkeeping:

  • Myth #1: Bookkeeping is just an admin task. Bookkeeping requires a strong understanding of tax implications and financial reporting. While a virtual assistant might handle basic data entry, they may not possess the knowledge to handle complex bookkeeping tasks.

  • Myth #2: Every business owner should do their own bookkeeping. Bookkeeping is a specialized profession. It's understandable for new or small businesses to handle their own books, but for businesses with complex needs, hiring a professional bookkeeper is essential.



Why is it Important to Understand Bookkeeping Needs?

By understanding the different types of bookkeeping and your specific business needs, you can ask the right questions when searching for a bookkeeper. This ensures you find a professional who can provide the services and support your business requires.



In Conclusion

Morgaine invites you to ask questions and leave comments below the video. Don't forget to share it with anyone who could use some bookkeeping tips!



Ciera Lancaster